Foolish Forecast: Wal-Mart Talks Shop

Savior of the penny-pinching housewife, bane of the small town shop-keep, and favorite customer to just about every factory in China, the world's biggest retailer is gearing up to report its fiscal Q2 2008 earnings numbers on Tuesday. Who are we talking about? Wal-Mart (NYSE: WMT), of course.

What analysts say:

• Buy, sell, or waffle? Twenty-three analysts track the progress of the bully from Bentonville. Seventeen of them rate the stock a buy, five more a hold, and one a sell.
• Revenues. On average, they're looking for sales to grow 8.5% to $92.7 billion.
• Earnings. Profits are predicted to rise 7% to $0.77 per share.

What management says:
Wal-Mart gave us a sneak peek at its first-quarter results on Thursday, with its July and past-26-weeks sales update. Same-store sales for July were up 1.6% (nice, but not as nice as the 6.1% rise in comps at Target (NYSE: TGT)), a slowdown from the 2.8% posted over the year to date. Total sales followed a reverse pattern, with 8.8% sales growth in the last four weeks, but only 8.4% growth year to date.

Compared to the analyst estimates, it therefore looks like Wal-Mart's sales eked out a small "beat." Sales in Q1 amounted to $86.4 billion. With year-to-date sales reaching $179.3 billion, that suggests that we should see Q2 sales reported at $92.9 billion on Tuesday. Management is pointing to grocery sales and electronics as particularly strong performers this quarter, and also sees "positive early signs" in back-to-school merchandise sales. That's an interesting contrast when you consider that several of the go-to back-to-school clothing retailers -- Aeropostale NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Pacific Sunwear (Nasdaq: PSUN), and American Eagle (NYSE: AEO), for example, have been reporting pretty weak results.

What management does:
What management does at Wal-Mart is turn in strikingly consistent performance. Rolling gross margins have only experienced a single, 10-basis point flutter over the last five quarters. Operating and net margins have held firm at 5.9% and 3.2% respectively for one full year.

Margins	1/06	4/06	7/06	10/06	1/07	4/07
Gross	23.9%	24.2%	24.2%	24.3%	24.2%	24.2%
Operating	6%	6%	5.9%	5.9%	5.9%	5.9%
Net	3.6%	3.5%	3.2%	3.2%	3.2%	3.2%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The Fool's own Michael Olsen chimed in recently on the subject of Wal-Mart's future, and its immediate future on Tuesday in particular. Here's what he had to say:

We'll put our noses deep into forthcoming quarterly results, but don't expect many surprises. For that matter, we think much better times are in store for Wal-Mart. The company has stated that it intends to slow the pace of expansion in U.S. locations, a smart move, and believe its recent attempts at streamlining inventory management encouraging. To the former, we think that capital can be employed to much greater affect overseas and/or in South and Central America, where the company can employ its core competencies in supply chain management to very meaningful effect, and expect these areas will yield decent growth for the foreseeable future.

And surprise, surprise! Wal-Mart is proving Michael right. Thursday's sales update showed Wal-Mart's international operations putting its U.S. stores to shame with roughly 16% growth in sales -- more than twice what we're seeing Stateside.

But does this growth justify putting more of your money in Wal-Mart stock? Take a free, 30-day trial to Motley Fool Inside Value, and find out what our stock sleuths say.

Pacific Sunwear and American Eagle are both Motley Fool Stock Advisor recommendations.

Fool contributor Rich Smith does not own shares of any company named above. Get your free refresher course in The Motley Fool's disclosure policy right here.